Soybeans: A Toast to Col. Hannibal Smith

• Though we are only two days into this week, the November soybean contract looks to have fulfilled the technical pattern set in motion this past June. 
• All the pieces of the puzzle seem to be coming together for a seasonal turn in both futures and cash, with the weak link being commercial selling tied to harvest. 
• Now we wait to see if the market is able to establish bullish technical signals on its various weekly charts. 

There is no doubt soybeans are a tough market. One has to be patient and brave, waiting for technical patterns to play out in a market that seems to thrive on volatile moves. But just as it tends to do, the November contract ((ZSX21) finally fulfilled its bearish technical pattern and now looks to be in position to turn a bullish corner. 

Let me remind you of a critical point before we take a look at what all has transpired: USDA is full of …… (feel free to fill in the blank with your word of choice), and anyone who actually takes the time to analyze markets knows last Thursday’s quarterly stocks number was a crock. 

Now that this is out of the way, again, let’s take this always intriguing market apart piece by piece: 

• Technically: November soybeans established an intermediate-term downtrend the week of either June 7 or June 14, 2021, the difference being whether or not one applies the Horseshoe Proximity to what looks to have been a bearish spike reversal the former week. The latter week saw the contract collapse to a low of $12.4050 before abruptly rallying back to a high of $13.56 the week of June 28. 
  • If we loosely apply Elliott Wave Theory, the initial selloff was Wave A (first wave) with the recover rally Wave B (second wave)
  • Given this, Wave C (third wave) of the 3-wave downtrend pattern would be expected to take out the Wave A low. Furthermore, the initial downside target was already down at $12.33, the 38.2% retracement level of the previous uptrend from the contract low of $8.2650 through the contract high of $14.80. 
    • Noncommercial traders have liquidated 189,600 contracts of their net-long futures position from late April through late September. 
  • Tuesday saw the contract hit a low of $12.31 before rallying, setting the stage for a possible bullish reversal on the weekly chart. 
• Fundamentally new-crop soybeans did not suddenly change last week. No, the trend in the Nov-July futures spread has been down since last May, falling from a high weekly close of a 59-cent inverse to this week’s 34.25 cents carry. 
• Seasonally, as I talked about at length on my website over the weekend, both November soybeans and the cmdty National Soybean Price Index (weighted national average cash price) tends to post a low weekly close last week. 

As the A-Team's Col. Smith was fond of saying, “I love it when a plan comes together.”